Jia Yueting, His Sister Are Unable to Implement Loan Commitments to Leshi, They Say in a Letter

Jia Yueting, His Sister Are Unable to Implement Loan Commitments to Leshi, They Say in a Letter

Dou Shicong

Date: Tue, 11/14/2017 - 11:03 / source:Yicai
Jia Yueting, His Sister Are Unable to Implement Loan Commitments to Leshi, They Say in a Letter
Jia Yueting, His Sister Are Unable to Implement Loan Commitments to Leshi, They Say in a Letter

(Yicai Global) Nov. 14 -- Cash-strapped Leshi Internet Information & Technology (Beijing) Co. [SHE:300104] (Leshi) has received a letter from its actual controller Jia Yueting and his sister, Jia Yuefang, stating they are unable to implement their loan commitments made earlier, the company said in a statement on Nov. 9.

Jia and his sister reached a share sale and loan agreement with Leshi in 2015. Jia Yueting said in a statement in 2015 that he will reduce his holdings in Leshi and loan all the proceeds from the sale to the company interest free for at least 60 months to supplement the firm’s working capital. He will increase his holdings in Leshi within six months if he gets repayment from the company, he added.

Jia and his sister promised to lend interest-free loans of CNY7.4 billion (USD1.1 billion) to Leshi when they sold their Leshi shares, per public information published by the company. They once lent up to CNY3 billion to Leshi at most. Since then, Jia and his sister have gradually taken away the money from the company. The loan was worth about only CNY400 million by the end of last year. Jia and his sister withdrew all the money by June 30, 2017.

Leshi later asked Jia Yueting and Jia Yuefang to continue their loan commitments twice. However, the company received a letter from them on Nov. 9 saying that they have no funds available to lend to the company and are unable to increase their stakes in the company as promised.

Given that the non-listed arms of Leshi and Jia Yueting himself experienced a financial crisis in the second half of last year, which continued to deepen in the first half of 2017, Jia Yueting has used all the proceeds from his share sale to repay his debts or invest in the non-listed arms of Leshi, making him unable to keep implementing his commitments, Leshi said in its statement on Nov. 9, citing Jia Yueting’s letter.

Jia Yueting also said that he is ready to loan the proceeds from his share sale to Leshi for use in the future permitting his financial conditions, adding that possible loans made by him in the future have nothing to do with his loan commitments and will be his voluntary acts.

Jia Yueting has not returned to China since leaving Beijing for the US in early July. During this period, Leshi said Jia Yueting will “return to China in about a fortnight” and later repeatedly said he “may return to China next week.” The latter statement has even been an online joke among China’s netizens as they often quoted “Jia Yueting will return to China next week.”

Jia Yueting said in a recent public interview that he will stay in the US to help his smart car project Faraday Future secure A-round financing. He also claimed that he may be barred from leaving the country if he returns to China and be prohibited from making big purchases, both of which he said could directly impact Faraday Future’s fundraising efforts.

Jia Yueting still held a 25.67 percent stake in Leshi as of Sept. 30 and remains the company's biggest shareholder. All of his Leshi shares have been frozen by the court.

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Keywords: Leshi, LETV, LEECO, Jia Yueting, Financial, Asset Freeze